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Bridgeway: Ultra-Small Companies the Place to Be

Bridgeway founder John Montgomery tells Morningstar what he was seeing from the shop's quantitative models.

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Bridget Hughes: Hi, I'm Bridget Hughes. I'm one of the mutual fund analysts here at Morningstar. I'm at the Morningstar Investment Conference for 2009, and I'm here with John Montgomery, who is the founder of Bridgeway Funds. Bridgeway Funds is a quantitatively run shop, and we've been hearing at the conference about all the opportunities that are out there today. Is there any one model that is just screaming "Buy!"?

John Montgomery: I guess to update to 2009, one of the big things is we have yet to see traction within our models. And by traction, our models are calibrated--primarily, so this is a generalization--but primarily with economic data at the company level. So when company-level economics are driving future stock prices, that's when our models tend to do best. We have some evidence that that's still not kicking in. Certainly this year's not awful on a relative basis or an absolute basis, either one, like last year.

Bridget B. Hughes does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.